"Desperate Apple Lobbies to Buy Memory Chips from China Firm on U.S. Sanctions List"

[Financial News]  

Apple, which has warned that it may raise product prices because of a memory shortage, is lobbying to secure memory chips from a Chinese semiconductor company on the U.S. executive branch's sanctions list, the Financial Times (FT) reported on the 27th local time.
Citing six sources, FT said Apple is lobbying the Donald Trump administration to allow it to buy memory chips from China's CXMT.
One source said Apple has been in contact with the United States Department of Commerce for more than a month and has also reached out to other government agencies and allies in Washington.

Apple is not barred from buying memory chips from Chinese semiconductor companies such as ChangXin Memory Technologies (CXMT) or Yangtze Memory Technologies Corp (YMTC). However, the United States Department of Defense has listed both as companies linked to the People's Liberation Army (PLA). Apple has launched the lobbying effort to head off any possible obstacles from the Defense Department's sanctions list.
On the 24th, Apple warned of price increases for its MacBook laptops and iPad tablets, sending its stock plunging and wiping out $263 billion in market capitalization. It was the second-largest drop in the company's history. Apple cited a sharp rise in memory prices at the time.
If Apple secures CXMT as a memory supplier, it could ease its memory shortage.
Apple has high hopes for the recent thaw in U.S.-China relations.
Last month, President Trump met with Chinese President Xi Jinping in Beijing and reaffirmed his willingness to improve ties. He also withdrew new technology-related export restrictions that had initially been planned for Chinese companies.
FT reported that doing business with companies on the Defense Department's sanctions list is not illegal, but it could pose a reputational risk.
The problem is the Commerce Department's sanctions list. CXMT was added last year to the so-called Entity List. However, the White House put the additional export controls on hold, and CXMT's designation was deferred, as it declared a truce in the trade war with China.

Even so, most sources say it is unclear whether the administration will allow Apple to buy memory semiconductors from CXMT. They also note that CXMT could later be added to the Commerce Department's export control list.
The White House's stance is also ambiguous. Even amid the thaw with China, it appears to be slowing any rapid improvement.
In February, the Defense Department updated its sanctions list, known as 1260H, but withdrew it in less than an hour. According to some accounts, someone at the Pentagon removed CXMT and YMTC from the list, and the White House was furious.
The list released again by the Defense Department this month reinstated the two memory chip makers.
Congress is another hurdle. If the administration tries to authorize Apple to buy memory chips from CXMT, lawmakers are expected to push back strongly.
Representative John Moolenaar, the Republican chairman of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, warned FT that "it would be a serious mistake for Apple to choose a Chinese military company as a partner."
Moolenaar added that "helping the Communist Party of China's plan to dominate critical supply chains would make our country's technology industry and economy even more dependent on China," stressing that "this is precisely the time when we must build secure technology supply chains with our allies."
Apple had already faced backlash in 2022 after considering the use of YMTC memory chips in iPhones sold in China. At the time, Marco Rubio, now the United States Secretary of State and then the top Republican on the United States Senate Select Committee on Intelligence, warned that "Apple is playing with fire."

Michael Sobolik, a security expert at the Hudson Institute, criticized the move, saying that "it makes no sense to decide to reduce dependence on critical minerals from China while at the same time approving new dependence on China in the equally important field of artificial intelligence (AI)."
A former U.S. official also expressed concern that if authorities allow Apple to buy memory from a subsidized Chinese company, it could put another industry at risk.
He noted that "Trump may want to show his commitment to promoting U.S. memory chips to protect our security and competitiveness, but he could also pour cold water on that effort by letting Tim Cook (Apple's CEO) squeeze out even more margin."
The global memory chip industry outside China is concentrated in three companies: Micron in the United States, and Samsung Electronics and SK hynix in South Korea.
China is offering massive subsidies and incentives to domestic companies, including CXMT, in an effort to challenge the memory market dominated by those three firms.

dympna@fnnews.com Song Kyung-jae Reporter